Back to All Posts

Day 25: Recession-Proof Your Finances

Apr 9th, 2020 • Jasmin Snyder

Are you broke and 50? Today is for you. Being broke and 50 is SCARY. You want to retire but the time between you and retirement is dwindling and your financial situation isn’t changing. You are likely stuck not knowing what to do. The good news is, you do have time and Pete has a clear plan to get you to retirement.

50 and Broke

You’ve got about 17 years to pull this off. It’s unlikely you’ll be able to retire at 62 if you’re broke, but 67-70 can happen. You have to focus on the now and the later. You need to start putting away money now so you’ll have some later, but you also have to understand what will be available to you later so you can start preparing for that NOW.

The best financial guidance we can ever give you is to need as little money as possible. I know, it sound simplistic but hear us out. Accumulating money is great but not needing money is better. It’s what is standing between you and retirement. You may be one of the millions of Americans who have increased your lifestyle as your income has changed. In fact, we believe that if you make over $60,000 a year it is much harder to retire because you are used to a more expensive lifestyle.

Why does that matter in retirement? Because your income changes. Here are the three types of retirement income:

  • Social Security
  • Pension
  • Investments

If you are 50 and broke the vast majority of your income is naturally going to come from Social Security. This can be a good thing or a bad thing. Pensions and Social Security are somewhat reliant on the economy so they are on a bit of shaky ground. If you can self-identify as ‘broke and 50’ you likely don’t have any investments… yet.

The Plan

To create a plan you have to start at retirement. Go to ssa.gov to check out your available monthly income at 67 or 70. For the sake of this example, let’s say you can get $2,500 a month from Social Security and because we are working toward this goal — you’ll have an additional $600 a month from investments. That’s $3,100 a month in income. This is the ‘later’ element.

Let’s go back to ‘now’. For this example your current net monthly income is $5,500 and your currently monthly expenses are $4,800. The gap here in need is a $700 surplus. But the gap from what you’re currently making to what you’ll receive in retirement is a stark $2,400 a month. We are trying to close this gap ASAP.

We’ll start closing this gap by putting the $700 surplus in your retirement account. This closes the gap from both angles. It’s reduces your need for that income (you aren’t spending it on lifestyle) and it grows your investments for future use.

The next way you’ll close this gap is through cutting expenses. This whole program is about cutting expenses, hopefully you’ve been a good student. But that brings us to the biggest expense you likely face each month — HOUSING.

In order to close this gap you must pay off your mortgage before you retire. Let’s guess that your mortgage is about $1.200 a month. If you pay this off prior to retirement you have cut your need for income by $1,200. If you pay it off a few years before retirement that’s more investing money you can shovel away.

Retiring is possible even when you start as late as 50, but it will likely look very different than your current lifestyle. This is something you need to reconcile with yourself. Many people live by the idea that retirement is just 10 years or so. But for many, many people it’s 20, 30, or even 40 years long. Can your current path carry you that far?

For more personalized guidance don’t forget that a Hey Money expert is always ready and waiting to help you sort out this mess. Use code ‘cheese’ to get a 10% discount on a monthly subscription just for being a part of the 30 day recession-proof your life program. Stay strong!

These live streams are still going strong and we still have a lot of ground to cover. To catch the live broadcasts like the Hey Money Facebook page to be alerted when Pete goes live at 2:00 pm EST daily.

Sign up for email updates